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Goldman Earns its Reputation

Goldman Sachs reported record earnings for the quarter this morning. No surprise.

I’m not one to pick apart a balance sheet, but Goldman made $1.4B more in the quarter than last year’s 2nd quarter. Earnings per share more than doubled.

Now the biggest gain was in trading revenue, which include its own trading for the firm. Goldman netted over $6B in reading revenue through stocks, bonds and commodities.

Goldman also took care of repayment of TARP funds as well a the warrants Uncle Sam held.

Now let’s look behind the number, Goldman was and continues to be the Supplemental Liquidity Provider for the NYSE. As a SLP Goldman makes money trading on just the purchase of the equity and the pop on the trades occurring in the immediate timeframe after Goldman’s purchase.

Sounds like a definition of front running.

This is under a NYSE plan, which is still under consideration with the Securities and Exchange Commission.

And then there is the program which was “stolen” by a former IT employee. As banking analyst Dick Bove said this morning, Goldman has more IT personnel than traders.